Military families struggling with debt have options for relief, including debt consolidation through credit counseling or loans, protection under the Servicemembers Civil Relief Act, student loan repayment programs, and debt settlement as a last resort. These options can provide lower interest rates, longer payment periods, and debt forgiveness, but caution should be exercised to ensure the best option is chosen.
There are several options for specially planned military debt relief for military families struggling to make their monthly bills. Debt consolidation options exist through credit counseling or a loan that pays off other types of debt, both of which typically create a single, lower-interest monthly payment. The Servicemembers Civil Relief Act exists to create restrictions on interest rates and other actions taken against military families, usually with respect to mortgages. Another targeted option is the student loan repayment programs available if you enroll during enlistment or reenlistment. Debt settlement is a last resort that can completely eliminate debt, but creates a negative impact on personal credit scores and possible issues with military stature.
Military debt consolidation through credit counseling is a form of military debt relief. This type is specifically aimed at families with multiple monthly payments on unsecured debt, such as credit cards. Counselors work with lenders toward partial debt forgiveness through reduced interest rates or payoffs of past balances. Benefits include longer time to pay off debt, revised high interest rates, and one monthly payment, all of which result in lower payments overall than multiple single payments. A military member’s credit score can be assisted by such a program with regular payments, as long as the due dates are met.
Consolidation loans are another option for military debt relief. However, the individual must ensure that the interest rate is comparable to other available unsecured loans. Caution should be exercised, as lenders will sometimes specifically use the word “military” in their title or when describing the loan when no such affiliation exists. When valid, these loans must have a lower interest rate than the high-rate credit cards released with such a plan, saving money in the long run.
The Servicemembers Civil Relief Act (SCRA) creates special protection for military personnel on active duty or recently completed active duty, along with their families. The main purpose of the SCRA is to postpone or suspend certain types of debt, including mortgage loans. Services include restrictions on the maximum interest rate chargeable, eviction, or legal proceedings regarding a mortgage. Military members are encouraged to seek legal advice when using this benefit.
A student loan repayment program can help pay off student loans if someone is considering joining the military. The program must be known in advance, as it must be applied for when enlisting or re-enlisting. 15% of the loan balance is paid up to the maximums, and each branch of the military has a different maximum. Certain minimum scores are also required on qualifying tests to receive this type of military debt relief.
If more military debt relief than the types discussed above is desired, then debt settlement might be considered. Simply put, someone who signs up for debt settlement is choosing to stop paying the debt. Although this is considered complete debt elimination, this method hurts an individual’s credit rating, and counseling should be sought so that the person understands both the implications for future credit needs and his or her status with the military.
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